The Honorable Rick Boucher
United States House of Representatives
2329 Rayburn House Office Building
Washington, D.C. 20515
Dear Congressman Boucher:
Thank you for your letter about the preliminary injunction issued by the United States
District Court for the Southern District of Florida on July 10, 1998, relating to the Satellite Home
Viewer Act ("SHVA"). I want to update you on what is happening in the court and at the
Commission regarding this matter.
Like you, I am concerned that the court's action may disrupt satellite service to
subscribers who cannot receive an acceptable, local network television signal over-the-air. I am
also concerned that this type of disruption may impede the continued development of
competition in the multichannel video programming distribution market.
The Florida federal court litigation highlights one of the difficulties with the SHVA,
which, as you may know, expires on December 31, 1999. The SHVA provides that satellite
carriers may retransmit network stations only to "unserved households." (For purposes of the
Act, ABC, CBS, FOX, NBC, and PBS currently qualify as networks.) An unserved household is
one that cannot receive, using a conventional rooftop antenna, an over-the-air signal of Grade B
intensity from a network station and has not subscribed within the past 90 days to a cable system
that carries an affiliate of the network. FCC rules define Grade B intensity. FCC rules also
define how to predict a Grade B contour for each television station. The FCC's rules define this
contour, often a circle drawn around the transmitter site of a television station, in such a way that
50 percent of the locations on that circle are statistically predicted to receive a signal of Grade B
intensity at least 90 per cent of the time. Moreover, although a station's predicted signal strength
increases as one gets closer to the transmitter, there will still be some locations within the
predicted Grade B contour that do not receive a signal of Grade B intensity.
The Florida federal court's preliminary injunction, however, establishes a presumption
that all households residing within the predicted Grade B contour can receive a signal of Grade B
intensity and therefore are not "unserved households." Yet, under the FCC's current rules and
predictive methodology, some subscribers inside the predicted Grade B contour do not receive a
signal of Grade B intensity because of, for example, topographic conditions. Additionally, other
subscribers receive a signal of Grade B intensity, but their reception is impaired by interference
conditions. Many of these subscribers, in fact, choose satellite-delivered services precisely
because this is the only way for them to receive network stations.
There are currently two petitions pending before the Commission that urge the
Commission to adopt rules that would clarify, among other matters, which consumers are eligible
to receive satellite-delivered network broadcast signals. One petition was filed by the National
Rural Telecommunications Cooperative (''NRTC'). In it, the NRTC requests the Commission to
redefine a "signal of Grade B intensity." In effect, the NRTC has asked the Commission to
change the definition of "unserved households." The NRTC's proposal, which is based on its
belief that the current standard fails to identify all households that are actually unserved, would
almost certainly result in an increase in the number of households deemed eligible to receive
satellite-delivered network stations.
The other petition was filed by EchoStar Communications Corporation. EchoStar
suggests that neither the Commission's definition of Grade B intensity, nor its model for
predicting Grade B contours, nor its methodology for measuring the strength of a television
broadcast signal are appropriate for SHVA purposes. In EchoStar's view, application of these
procedures does not identify all truly unserved households. EchoStar's petition requests that the
FCC: (1) adopt a new signal intensity standard that identifies unserved households; (2) revise its
signal strength prediction model; and (3) specify a signal strength measurement procedure that is
less expensive and cumbersome than the present one.
The FCC placed both of these petitions on Public Notice and received numerous
comments. In response, the Commission will soon commence an expedited rulemaking
proceeding on ways to improve the implementation of the SHVA, consistent with our statutory
authority. The Commission intends to conclude this expedited rulemaking proceeding in
February 1999.
To prevent consumers who cannot receive an adequate local network signal from losing
service while the Commission conducts its rulemaking, it was important that the U.S. District
Court for the Southern District of Florida postpone the effective date of its injunction. This was
done on September 30, 1998, when the presiding judge in the SHVA litigation in Miami, Florida,
signed an Order filed by the broadcast and satellite parties to the litigation. (I am enclosing a
copy of the signed Order for your information.)
The Order extends from October 8, 1998, to February 28, 1999, the date by which the
satellite carrier, PrimeTime 24, must terminate delivery of distant CBS and Fox Broadcasting
network signals to households "served" by their local CBS and Fox network affiliate stations.
This extension will protect many consumers over the next four months from having their satellite
network programming services terminated. The extension will also allow consumers more time
to evaluate their options to receive local network signals. The court's Order, for example,
requires PrimeTime 24 and its distributors to give subscribers "ample advance written notice" of
their termination of satellite network service as well as a letter explaining their options for
receiving local network signals. The letter must also explain that the court's Order "permits
continued satellite delivery of network signals to subscribers who have obtained consent from the
relevant station(s) or who have been tested and found not to receive a Grade B intensity signal
from a network station of the relevant network." Finally, the court's Order specifies procedures
to identify and notify subscribers of broadcaster waivers and consent to continued satellite
service.
I support this Order and the underlying agreement by the parties to the Florida litigation
to delay enforcement of the court's injunction until February 28, 1999. However, I continue to
believe that ultimately, important aspects of this dispute, such as how to determine who resides
in an "unserved household," would best be resolved through private negotiations. I believe such
a voluntary agreement negotiated by the principal private parties in the multichannel video
programming distribution market can be as effective and durable as any governmentally
mandated solution.
Assuming, however, the parties cannot reach such a voluntary agreement, I support
Congressional action with respect to satellite retransmission of local broadcast signals. More
specifically, the SHVA currently does not permit satellite carriers to provide network stations,
even local ones, to households that are not "unserved." The cable compulsory license imposes
no such limitation. If Congress amended the SHVA to permit "local-into-local" retransmission
of network signals, satellite carriers would be able to offer the same network programming that
cable companies currently provide, thus making satellite carriers more effective competitors to
cable. Moreover, such "local-into-local" legislation would not compromise the intent of SHVA
to protect the current exclusivity provisions of the broadcast network television distribution
system, as well as the viability of local affiliates and network-affiliate relationships.
Congress could also amend the definition of unserved household to reduce the disparity
of treatment between cable and satellite services. The current definition prohibits a subscriber
from receiving satellite-retransmitted network signals if he or she has subscribed within the past
90 days to a cable service carrying an affiliate of the network in question. Imposing a 90-day
waiting period for network station access on those who wish to switch from cable to satellite
service places an unwarranted handicap on the satellite carriers in their competition with cable.
Finally, legislation would be helpful to address other barriers to increased competition
between the satellite and cable television industries. These measures would include efforts to
harmonize the compulsory license regimes among the various multichannel video programming
distributors by, for example, applying the same methodology to determine the copyright fees
paid by satellite and cable companies for broadcast superstation and network programming.
I do not condone the conduct of any satellite provider that is not in compliance with
SHVA. But I believe that those consumers who are unable to receive an acceptable, over-the-air
signal should have a lawful, alternative means to receive network programming via satellite. I
therefore look forward to working with you and your colleagues in the next Congress to assist
consumers without an acceptable, over-the-air signal, and to promote competition in the
multichannel video programming distribution market.
Sincerely,
William E. Kennard
Chairman
Enclosure